Confidence bounces back but job creation remains weak, says FSB

The Federation of Small Businesses’ (FSB) ‘Voice of Small Business’ Index for the first quarter of 2011, has shown that small businesses’ employment intentions weakened even though business confidence has improved since the end of 2010.

At the end of 2010 a balance of -2.5 per cent of businesses thought they would have to make cuts to their employment levels. However, -6.5 per cent actually decreased headcount during the quarter – showing that businesses are having to make tough decisions.

This comes as unemployment figures released last week showed that both female and youth unemployment rose while the overall unemployment figure fell to 2.48 million in the three months to February. However, looking ahead to the next three months, businesses paint a more encouraging picture with fewer members reporting that they will decrease (-1.7) headcount.

The FSB has called on the Government to help businesses by extending the National Insurance Contributions (NICs) holiday to the very smallest businesses. This would help small firms to take on staff – especially in those areas reliant on the public sector where unemployment is likely to rise further.

Small business confidence, which the Small Business Index measures, rose for the first time to +6.7 in the first quarter, after falling in each quarter in 2010. This perhaps indicates that the economy will return to growth when GDP figures are released at the end of the month, so avoiding a technical recession. In total 36 per cent of small firms expect overall business performance to improve in the next three months.

However, across the UK, business confidence is weakest in those areas heavily dependent on the public sector. Small firms in Northern Ireland are least confident at -25 per cent and Wales is second lowest at -11 per cent. This gives further clout to the need to extend the NICs holiday.

John Walker, National Chairman, Federation of Small Businesses, said:

“The fact that more small businesses had to lose staff in this quarter than they anticipated is a worry – especially as female and youth unemployment both edge towards a million. If the Government truly wants the private sector to pick up the slack that its austerity measures create, small businesses need a helping hand.

“At the end of 2010 the feeling across the country was very downbeat as businesses lost confidence, having to deal with a rush of challenges from the impending rise in VAT, to the economy dipping back into negative territory. This continued into 2011 as fuel prices increased and inflation affected spending power.

“While the overall picture suggests that members are bouncing back from a harsh winter, and that the economy should return to growth in the first quarter, questions still remain about the strength of recovery.”

ENDS

Notes to Editors

1. The FSB is Britain’s leading business organisation with over 205,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

2. The ‘FSB Voice of Small Business’ Index is a quarterly macro-economic report analysing the trends of small businesses in the UK market. To view the ‘FSB Voice of Small Business’ Index please go to www.fsb.org.uk/small-business-index

3. According to the Office for National Statistics’ public-sector employment bulletin, public-sector employment makes up 26 per cent of all employment in Wales and 30 per cent in Northern Ireland, compared with a UK average of 21 per cent. Hence it is likely that small businesses in these parts of the UK are more concerned about the effects of the impending public sector cuts.

4. This report has been produced by the centre for economic and business research (cebr). The report is based on 1,710 responses from the March 2011 FSB ‘Voice of Small Business’ Survey Panel of FSB members which took place between 7 and 18 March 2011.

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Contacts
Andrew Cave, Chief Spokesperson: 07917 628991
Sophie Kummer: 020 7592 8128/ 07917 628998 sophie.kummer@fsb.org.uk
Prue Watson: 020 7592 8121/ 07825 125695 prue.watson@fsb.org.uk
Sara Lee: 020 7592 8113/ 07595 067068 sara.lee@fsb.org.uk
For regional FSB contacts please go to www.fsb.org.uk/regions